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Westerville Company reported the following results from last years operations: Sales $ 1,500,000 Variable expenses 650,000 Contribution margin 850,000 Fixed expenses 580,000 Net operating income

Westerville Company reported the following results from last years operations:

Sales $ 1,500,000
Variable expenses 650,000
Contribution margin 850,000
Fixed expenses 580,000
Net operating income $ 270,000
Average operating assets $ 1,000,000

At the beginning of this year, the company has a $160,000 investment opportunity with the following cost and revenue characteristics:

Sales $ 240,000
Contribution margin ratio 70 % of sales
Fixed expenses $ 144,000

The companys minimum required rate of return is 10%.

6. What is the ROI related to this years investment opportunity?

7. If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year?

9. If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?

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